State challenges lowly Forbes ranking

Posted Oct. 20, 2010, at 10:35 a.m.
Last modified Oct. 24, 2010, at 6:32 p.m.

PORTLAND, Maine – The editor of the Forbes magazine package that put Maine at the bottom of the list of business-friendly states said the ranking should be considered a snapshot in time, but added that companies consider the same data when looking for places to locate.

The ranking, released last week, put Maine at 50. In 2009, Maine had hit a high of 41, having been ranked 46, 48, and 46 in the previous three years that Forbes did the ranking.

Forbes used both data it uncovered as well as information from a variety of sources to compile the list, most heavily relying on Moody’s Economy.com, but also using reports from Pollina Corporate Real Estate, Pacific Research Institute, the Tax Foundation, Sperling’s Best Places, the Better Government Association the U.S. Census Bureau, the Small Business Administration, the FBI, and the U.S. Department of Education.

Several business professors in the state said the report merely reflects reality in Maine. However, one state official suggested the Forbes ranking amounts to broad generalities that tend to reflect the magazine’s pro-business background, while ignoring what many consider Maine’s strengths.

Any business looking to locate operations in Maine would drill deeper down into specific data, said Kurt Badenhausen, senior editor at Forbes.

“I don’t think numbers ever tell the whole story. But I think this gives you a good snapshot of the business climate in a state. When a state’s at the bottom, companies are looking at the same kind of data we are,” said Badenhausen. “They’re looking at business costs, they’re looking at the regulatory environment in a state, if there’s going to be educated labor they’ll be able to hire, at quality of life issues.

“These are all things that businesses are considering as well.”

A few things put Maine low down on the list, said Badenhausen. Maine’s labor costs were 14 percent higher than the national average, he said, with only Massachusetts and Hawaii higher. Maine’s growth prospects increased in 2009, said Badenhausen, accounting for the ranking of 41. But those growth prospects were revised downward, relative to the rest of the country, and that was a ding on Maine this year, he said.

“These are all projected figures, and the estimates tend to fluctuate from year to year based on the immediacy of what’s going on from state to state,” said Badenhausen.

And other states have been increasing the incentive packages they’ve been offering to companies to come to their states, and that’s put Maine in a worse position, relatively speaking, he said.

“It’s not something Maine actually did; they just haven’t kept up with what other states are doing,” said Badenhausen.

David Farmer, Gov. John Baldacci’s deputy chief of staff, argued that Maine’s Pine Tree Zone program has worked well as an incentive program, and was expanded to the entire state. Two companies, Kestral Aircraft in Brunswick and Athena Health in Belfast, cited the program as a reason to come to Maine, he said. And recent Maine Technology Institute grants supported by voters have been aiding businesses in sectors like biotechnology, composite manufacturing and energy, Farmer said.

Farmer pointed to the Maine Development Foundation’s annual Measures of Growth report, which this year gave the state good marks for seeing state and local tax burden decline as a percentage of income, and on the cost of doing business here. The foundation, said Farmer, uses Moody’s Economy.com data in its report, just like Forbes.

“Somehow, these two reports are cutting and slicing the same data and getting a different answer,” said Farmer. “It shouldn’t come as a surprise that a pro-business magazine like Forbes, owned by a former Republican presidential candidate, would favor polices that are conservative — and Maine, in some ways, is progressive.”

Farmer questioned how the magazine could rank New Jersey as having a better quality of life than Maine, and noted that Massachusetts raised its sales tax last year from 5 percent to 6.25 percent, but still ranked higher than Maine overall at number 16. California also ranked higher (number 39) than Maine, yet that state is undergoing a financial crisis, has bond troubles and leads the country on environmental regulations.

And Forbes also ranked Portland as the country’s most livable city last year, Farmer said.

“The same magazine listed Portland as one of the best cities to live and work. Portland is a large metropolitan area, it operates under the same regulatory environment as the rest of the state, it has the same state level tax structure as the rest of the state, yet Forbes says that’s a great place to live and work. How do you jibe that information?” said Farmer.

Jeanne Munger, an associate professor of marketing at the University of Southern Maine, said the Forbes report reflects what she sees for many of her students as they graduate: they have to leave the state to find work.

“More than anything I think it reflects people’s perceptions; I think it reflects reality. We’re at the bottom of a lot of indices, at the bottom quarter, at the very least,” said Munger. “But being rock bottom in Forbes should send a wake-up call to some of us.”

John Mahon, chairman of International Business Policy and Strategy at the University of Maine, said he thought the report reflects a lack of a sustainable economic development plan for the state, and a dearth of effort in attracting business to the state.

The Legislature is anti-business, he said, or, at least, apathetic to business.

“Business within the state does not trust the Legislature,” said Mahon, “and I think the reverse is true as well.”

And the state’s infrastructure needs dramatic improvement, he said, including roads, telecommunications and energy.

Maine’s Ranking in Forbes over the last five years

2010

Overall Rank 50

Business Costs 47

Labor Supply 26

Regulatory Environment 48

Economic Climate 45

Growth Prospects 44

Quality of Life 16

Population 1.3M

Gross State Product $40B

2009

Overall Rank 41

Business Costs 44

Labor Supply 25

Regulatory Environment 32

Economic Climate 39

Growth Prospects 28

Quality of Life 19

Population 1.3M

GSP $40B

2008

Overall Rank 46

Business Costs 44

Labor Supply 26

Regulatory Environment 32

Economic Climate 39

Growth Prospects 43

Quality of Life 19

Population 1.3M

GSP $41B

2007

Overall Rank 48

Business Costs 43

Labor Supply 27

Regulatory Environment 46

Economic Climate 30

Growth Prospects 42

Quality of Life 16

Population 1.3M

GSP $42B

2006

Overall Rank 46

Business Costs 45

Labor Supply 26

Regulatory Environment 49

Economic Climate 21

Growth Prospects 48

Quality of Life 21

Population 1.3M

GSP $42B

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